An Introduction To The 80-20 Rule

Working from home can be one of the most rewarding jobs you could possibly have. You are home when your kids are, you can get chores done around the house, all the while working and generating income for you and your family.

Typically, in this day and age you can start a business from home at a relatively low cost. Your earnings may be small until you develop your brand and build your clientele but you will be seeing a profit nonetheless.

However, as anyone who works at home will tell you, before you embark on a work-at-home career, you have to concentrate your efforts towards goals if you want to thrive.

One way to accomplish this is by following The Pareto Principle (aka the 80-20 Rule). This theory will allow you to successfully use your resources to your full advantage.

If you’re pressed for time or not into how the whole principle came about, you may skip all this and go directly to how you can apply the 80-20 Rule in the real world.

What is the Pareto Principle?

Also referred to as Pareto's Law, Pareto Distribution – and through the last decade – the 80/20 Principle, the concept behind Pareto's Principle has been around for over a century. The basics behind the principle are that you do your homework to ensure that you're putting your effort in the most productive areas of your life, whether personal or in your workplace.

Vilfredo Pareto (1848-1923), an Italian economist who made a seemingly simple observation, originally developed the Pareto Principle.

Pareto noted that 20% of the population owned 80% of the wealth and income. In his day, wealth was determined by the amount of land one owned. Although this may not sound like an earth shattering revelation, the 80-20 Rule applies to many aspects of life. Not only does it prove to be true in matters of business and economics but can be positively applied in one's personal life, as well.

What's in a Name?

About 40 years after Vilfredo made his observation, Joseph M. Juran further developed the idea. He was a business management consultant, placing him in a good position to influence other professionals who were searching for more meaning in their endeavors. It was Juran who actually named the principle after its original developer – Vilfredo Pareto. Today, the Pareto Principle is also referred to as the “law of the vital few”.

How Does the 80-20 Rule Affect You?

It affects each individual differently. The way that it affects you depends on your understanding that in all things, few key actions you make are vital whilst others only offer small returns.

In other words, when you effectively manage your affairs – business or personal – you will have a better knowledge of where to channel your efforts to obtain the greatest gain.

In looking at the Pareto Principle in a positive light, it is a definite advantage. Juran first attributed the rule as 80% of the problems came from 20% of the defects. While this is another relative fact, it is more in line with the glass half-empty view of life.

Pareto observed that 80% of the peas in his garden were contained in 20% of the pea pods he had planted.

In order to put the Pareto Principle to work for you, you need to look at the success rate of 80% for only 20% of the effort.

Conversely, realize that the ratio can vary – especially when you are first testing the waters with this principle.

In business, particularly for those individuals in sales, the Pareto Principle rings very close to reality :-

- 80% of the sales are generated by 20% of the sales force.

- 20% of consumers purchase 80% of the goods.

Along the same lines , the salesperson's efforts can be viewed as 20% of the company yielding 80% of the revenue. This is really where the principle becomes relevant and where you should focus your efforts.

You Being Your Own Boss

Running your own business from home, the chances are, you spend the majority of your working time running the day-to-day operations of the business - the same mundane tasks.

It’s frustrating when at the end of the day, upon examining all the tasks you performed, you realize that you haven’t tackled the most important matter that you should have done first thing in the day.

That way 80% of your activities are contributing to only 20% of the results.

Instead do some homework and take wise decisions.

Determine which parts of your business generate the best positive returns and which maybe, can be improved. Merge that with what you do best. As for the rest, resolve on whether to outsource, delegate or simply drop altogether.

This way you turn the ratio to 20% of your activities to produce 80% of the results.

Plus, you'll be able to move forward in the direction that you want.

Planning and Self-Discipline Play A Good Role Here

Planning provides you with direction and gets you thinking about investing your resources to the few features that provide the greatest return to your business. Self-discipline motivates you to follow through.

Applying the principle, you already know that only 20% of what you do is going to yield the majority of your success (80%). Once you understand that, it should help you accept the efforts made which do not (necessarily) produce the desired results.

Rest assured that this is not a reflection on you - specifically, that 80% of your effort only nets 20% return, as the rule is true for everyone!

With this engraved in mind, you can then work harder so that the more important 20% of your actions produces more positive returns. Again, this can be applied to your business endeavors as well as your personal life goals.

What puzzles some individuals about the 80/20 rule is that they must still make the efforts for the entire workday, meaning 100% effort put forth. The person who chooses to work 20% of the workday to produce 80% of the revenue and goof off for the rest of the day has missed the concept entirely. This is not how it works. Decreasing your workday will definitely diminish results.

To defeat your busyness, often resulting in overwhelm, be selective in the tasks that you do. Do less – but give your 100% energy on those few tasks and let alone the rest. Avoid tasks you do to fill time and focus harder on the ones that produce greater outcome. Eliminate stuff that no longer function.

Start immediately by distinguishing the important from the urgent. If you get stuck telling them apart, look at the opportunity cost of the one foregone.  Ask yourself these 2 questions :-

  • Is it worth postponing the more important to do the seemingly urgent?
  • What is the worst thing that could happen if I miss out on the urgent task?

Side note - When you find it difficult to decide, picture yourself as if it’s your last day at the office before you go on vacation for two whole weeks. Believe me it works!

Continue reading to get ideas on how to apply this principle directly to your own life. In doing so, you’ll be able to boost your productivity and creativity – both professionally and personally.

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